CS Disco, Inc. (LAW) Q1 2022 Earnings Call Transcript

CS Disco, Inc. (LAW 1.17%)
Q1 2022 Earnings Call
May 12, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the CS DISCO first quarter of fiscal year 2022 conference call. [Operator instructions]. I would now like to hand the conference over to your first speaker today, Lee Robinson, CS DISCO investor relations. Please go ahead. 

Lee Robinson -- Investor Relations

Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for DISCO's first quarter of 2022. With me on today's call are Kiwi Camara, DISCO's co-founder and chief executive officer; and Michael Lafair, DISCO's chief financial officer. During today's call, we will review our financial results for the first quarter of fiscal year 2022 and discuss our guidance for the second quarter and an update on full fiscal year 2022. Today's call will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding our financial outlook, including our guidance for the second quarter and full fiscal year 2022, our market opportunity, market position, product strategy, and growth opportunities.

In addition to our prepared remarks, our earnings press release, SEC filings and a replay of today's call can be found on our investor relations website at ir.csdisco.com. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Forward-looking statements represent our management's beliefs and assumptions only as of the date made. Information on factors that could affect the company's financial results is included in its filings with the SEC from time to time, including the section titled risk factors in the company's annual report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022, as amended on April 29, 2022, and the company's upcoming Form 10-Q for the quarter ended March 31, 2022.

In addition, during today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP to non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus their closest GAAP equivalents is available in our earnings release. And with that, I'd like to turn the call over to Kiwi. 

Kiwi Camara -- Co-Founder and Chief Executive Officer

Thank you for joining our Q1 2022 earnings call. I'm tremendously proud of what we've built and how we've continued to innovate to create a comprehensive legal technology platform that transforms the way the legal industry works. I continue to be excited about the future of DISCO and our goal to be the technology that powers legal. In the simplest of terms, our ethos at DISCO is to build and offer technology that frees lawyers to actually practice law and, most importantly, achieve better legal outcomes in a more efficient tech-enabled way.

I will begin with a brief overview of our Q1 2022 financial results. We are pleased to have achieved another quarter of strong growth across the business. Revenue grew to 34.5 million, up 63% year over year. Notably, we had a record month in March for Ediscovery usage growth.

Our international revenue nearly doubled year on year, attributable in part to the continued expansion of our U.K. team. These results reflect our ability to continue to increase adoption and the penetration with existing clients, continue to win new clients, and expand the multiproduct usage across our platform. We are thrilled with the continued growth and adoption of our software powered solutions by lawyers who see the value in shifting to a technology-first approach.

I will highlight a few key achievements from the quarter, capturing more of the corporate legal value chain, introducing meaningful product enhancements, continued successful scale-out of an execution by our go-to-market organization, and a few illustrative customer success stories. In Q1 2022, we expanded our platform to capture a larger portion of the legal value chain and continue our mission to build a complete solution for legal departments' needs. Historically, we have done this organically by growing our existing products and building new products in-house like early case assessment and case builder. In Q1, we completed our first acquisition, acquiring legal hold and data request technologies from Congruity 360 that address some of the most pressing needs of corporate legal departments.

Our acquired DISCO Hold product automates the manual work that is necessary to comply with corporate preservation requirements, which has become critical with increasing volumes of enterprise data that corporations must capture and save for regulatory requirements or legal demands. In particular, DISCO Hold excels at connecting to and holding in place data in modern cloud systems of record such as Office 365. The DISCO Request product dramatically simplifies the process of tracking and responding to subpoenas and other data access requests. With this acquisition, we move closer to the of the corporate legal value chain, access a new segment of the market and gain a new entry point with customers.

We're excited to add these products to our platform and the team that came to DISCO with that. We are at the early stages of introducing DISCO Hold and DISCO Request to our existing clients and presenting DISCO's full spectrum of products to the clients that already use hold and request. In March, following the close of the acquisition, we ported over all of the existing hold and request clients to DISCO and completed more than a demo per day of the hold product. As we fully integrate the DISCO Hold and DISCO Request products in our go-to-market motion over the coming months, we look forward to expanding our multiproduct strategy and helping our clients streamline their legal processes from start to finish.

This broadening of our platform offering is consistent with our strategic vision, which we discussed on our fiscal year 2021 annual earnings call. Our focus on improving clients' daily user experience drives innovation and customer satisfaction. We continuously roll out product enhancements to make the daily lives of lawyers easier and their legal processes more efficient. We were pleased to hear from customers that DISCO's AI is a key competitive advantage and one of the primary reasons they choose to use DISCO.

In Q1, we introduced time tracking and review, which allows customers to measure and report on review of productivity, including documents per hour, time spent in app, or time spent per document. This feature have their corresponding metrics, enable customers and managers to assess performance of document reviewers, and view how much time is spent on any given review. In addition, tracking time in the app allows customers to reconcile billing entries for review activity with actual time spent using DISCO. This was a highly requested feature from customers, and we are thrilled to be able to offer it to them.

We also released enhancements to our native redaction capabilities and to the reusable filter component that is part of our application architecture and to share between DISCO products like Ediscovery and Case Builder. We are also pleased to announce new evidence management functionality in DISCO Case Builder. Today, the platform's annotations page provides case teams with a holistic view of all annotated testimony from across all of their depositions and witnesses on a single screen, from which litigators can search, review, edit and export the best evidence for use in depositions, motions practice or trial.   Now in addition to using the annotations page to identify and make strategic use of key excerpt deposition testimony far faster than they otherwise could, legal teams are also empowered to compare the corresponding video evidence across witnesses on the same screen. Equipping litigators with a side-by-side analysis of deposition of video clips not only allows them to more readily compare witnesses presentation and potential case impact, but also to more confidently select and prepare the best evidence for use in the development of a winning case strategy.

That is to build a stronger case faster. We take performance of our platform seriously and continually invest in performance improvements across multiple aspects of our core products and platform. We have continued to optimize our data processing pipeline, critical for efficiency and user experience with the rising volumes and types of data that corporations have to deal with, and we made measurable improvements to document ingest and loading speeds. In addition to our investments in our products, we are pleased with the progress and productivity of our expanding go-to-market team.

As we've talked about in the past, we have ambitious plans to expand our go-to-market organization, and we are making good progress toward that goal. In the last year, we have doubled our ramp of quota-carrying reps and will continue to build that team. In addition to growing scale, we are seeing growing productivity across many teams. Our sales development representative team, many of whom are recent hires and who initiate lead generation and introduce prospects to DISCO, were more effective on a per-head basis and in the aggregate than in any other quarter.

And our customer success team, who often are the first to identify upsell or cross-sell opportunities, had a record win quarter with impressive product cross-sell and expansion of DISCO usage within existing clients. We are excited to see the investments in our people generate solid business results. As demonstrated by our results in Q1, we continue to see great momentum across our client base and products. As we've done in prior earnings calls, we enjoy sharing customer anecdotes that demonstrate how the DISCO platform is used by clients, how quickly adoption can ramp and be expanded across our clients' legal organizations and the benefits that our clients see in using DISCO.

One of our Q1 success stories is a new corporate client that was introduced to DISCO through a partner at their external counsel at an Am Law 100 firm. This corporate client became a six-figure, multi-product client within their first quarter using DISCO. This is a great example of the trends we've seen and discussed previously, where we're landing larger clients, clients are ramping usage more quickly and using more than one DISCO product. The client's choice to try DISCO and continue to increase usage of the DISCO platform was initially driven by our ability to offer flexible product usage options and the simplicity of our pricing model, which allowed them to make an informed and financially transparent decision for their Ediscovery and review needs.

Another new corporate client in Q1 began when our sales team met with our deputy general counsel. They had a large case where they have not yet picked an Ediscovery provider. The corporation was working with the litigation team as outside counsel and there was a lot of data, around 350,000 documents to parse through for the case. To win the mandate, our team demonstrated DISCO's ability to be a total solution to both outside counsel and the corporation's general counsel to manage data collection, Ediscovery and preparation for the case.

They appreciated our ability to offer a predictable, flat fee guaranteed pricing on review despite the slight premium on our Ediscovery software. Since the start, they've expressed their appreciation for the experience they've received from the DISCO team, including daily updates on hot documents found in the review process, our team's follow-ups to discuss trends in the documents and their ability to see these trends themselves using DISCO's AI, and the Ediscovery user experience, and ultimately the completion of the initial review under their time deadline. We look forward to continuing to work with this client through the completion of the matter and hopefully secure a new long-term relationship. Additionally, we had a large Am Law client who has been with the DISCO since 2014 ramp its usage and spend on DISCO by more than 6x in Q1 2022 compared with highest historic spend quarter.

This is a great example of a couple of points we like to talk about. One, our viral adoption; and two, multiproduct usage and expansion. The lead lawyer who used DISCO at a prior firm moved to his new firm and championed the increased use of DISCO on new matters and among other partners at the firm. This firm has steadily added new Ediscovery matters and more recently, chose DISCO review for a large, highly complex, multiple defendant, multiple plaintiff case.

This specific review matter had over 1 million documents under review using DISCO over the last quarter. And notably, the client quoted DISCO's AI as being a huge benefit in getting the evidence in a timely better, faster than they initially thought possible. Lastly, we were very happy to have one of our oldest and largest clients and one of the first Am Law 100 law firms to fully adopt DISCO, reviewed their multiyear subscription agreement with us. This type of long-term relationship is one we want to achieve across all clients and reaffirms their belief in the benefits of adopting and using DISCO's products.

They have demonstrated to their clients that they are at the forefront of adopting innovation in law. We also once again participated and sponsored Legally in New York City, one of the premier legal industry conferences. During Legal Week, our team participated in thought leadership panels, conducted numerous product demos, heard tremendous positive feedback about the acquisition of our Hold and Request products, and made great connections with potential new clients who we are excited to continue the dialogue with and to share the benefits of DISCO. In summary, we are thrilled to have had another strong quarter.

And as we communicated last quarter, we will continue to invest behind our growth and scale the DISCO organization to best serve our clients now and in the future. And with that, I'll turn it over to Michael. 

Michael Lafair -- Chief Financial Officer

Thank you, Kiwi. I am pleased to discuss the details of another strong quarter and provide guidance for Q2 2022 and an update on our outlook for fiscal year 2022. I'd like to reiterate that our business is primarily a usage-based model that is driven by the number and nature of matters, volume of data, length of time on the platform, and other factors that may impact revenue in any given quarter. As Kiwi mentioned, Q1 revenue was 34.5 million, up 63% year over year.

We had strong performance with growth coming from increasing usage from existing customers and new customer wins, particularly in Ediscovery as well as increased usage across all of our products versus the same quarter in the prior year. In discussing the remainder of the income statement, please note that unless otherwise specified, all references to our expenses, operating results and share count are on a non-GAAP basis. Our gross margin in Q1 was 74%, up from 73% in Q1 of the prior year. As a reminder, our gross margins fluctuate from period to period based on, for example, the amount and types of data ingested and managed on our platform.

We expect gross margin to continue to be within the bands we've historically seen. Sales and marketing expense in Q1 was 15.6 million or 45% of revenue compared to 37% of revenue in Q1 of the prior year. This represents an increase of over 7.8 million in the quarter year on year. As we've previously mentioned, we are focused on expanding and investing in our go-to-market organization.

We have historically been very measured and efficient in our go-to-market organization and feel that now is the right time to invest and scale, along with the sustained levels of elevated growth we've achieved in the U.S. and internationally. We've made key hires to help with this effort, including our new Head of Human Resources, Jignasha Grooms, who started with us a couple of weeks ago. Jignasha brings key expertise and experience in scaling international operations across functions.

Research and development expense in Q1 was 10.9 million or 32% of revenue compared to 29% of revenue in Q1 of the prior year. This represents an increase of over 4.8 million in the quarter year on year as we continue to invest in our products, platform and new features to help our clients. General and administrative expense in Q1 was 7.7 million or 22% of revenue compared to 18% of revenue in Q1 of the prior year. This represents an increase of over 3.8 million in the quarter year on year.

We have strategically added to our G&A organization following our IPO to support the increasing scale of our business. Operating loss in Q1 was $8.6 million, representing a margin of negative 25%, compared to negative 11% in Q1 of the prior year. Adjusted EBITDA was negative $7.8 million in Q1, a margin of negative 23%, compared to a margin of negative 9% in Q1 of the prior year. Overall, our EBITDA was better than guidance due to the increase in revenue and some hiring, onboarding and other investments pushed from Q1 into Q2 and further quarters.

Net loss in Q1 was 8.6 million or negative 25% of revenue, compared to a net loss of 2.4 million or negative 12% of revenue in Q1 of the prior year. Net loss per share in Q1 was $0.15 per share, compared to a net loss per share of $0.18 in Q1 of the prior year. Turning to the balance sheet and cash flow statement. We ended Q1 with $238.6 million in cash and cash equivalents.

Operating cash flow in Q1 was negative $11.4 million, compared to negative $4.5 million in Q1 of the prior year. Now turning to the outlook. For Q2 2022, we are providing revenue guidance in the range of 32 million to 34 million, representing 12% year-over-year growth at the midpoint. For Q2 '22, we are providing adjusted EBITDA in the range of negative 17 million to negative 15 million, representing adjusted EBITDA margin of negative 48% at the midpoint.

As we mentioned on our last quarterly call, we do anticipate operational costs to continue to grow in Q2 and throughout the year as we continue to invest in our product, go-to-market team, and G&A. Through the full fiscal year 2022, we are raising our revenue guidance in the range of 149 million to 153 million, representing 32% growth at the midpoint. For the full fiscal year 2022, we continue to expect adjusted EBITDA between negative 51.5 million to negative 43.5 million, representing adjusted EBITDA margin of negative 31% at the midpoint. In summary, we are delighted with our strong start to the year and continue to be excited about where we are headed and the opportunity in front of us.

We will continue to build innovative solutions and a scalable platform that fully serves legal teams and transforms the way legal work is done. We will continue to build our organization to keep pace with our growth and have the right people in place to attain our goals. We will also continue to go after market share in a large market that is ripe for technological disruption and DISCO's leadership in its transformation. I'd like to now turn the call over to the operator to open up the line for Q&A.

Operator?

Questions & Answers:

Operator

[Operator instructions]. And we will take our first question from Koji Ikeda with Bank of America. Your line is open.

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

Thank you, Lee and Mike. Thanks for taking the questions here. A couple for me. First, OK, so the second quarter guide, I just wanted to ask a couple of questions here on that.

When looking at it from a sequential basis, it's going to be -- you're guiding to it being down quarter over quarter. And that's similar to how you guided or initially guided to the first quarter when you -- on the fourth quarter call. So I kind of understand the puts and takes there. But I just wanted to be sure, is there anything that we should be thinking about in the second quarter to call out? Is there anything seasonal? Is there any matters that have come off already of the platform that we should be thinking about? Any sort of help there and just kind of reconcile that quarter-over-quarter decline with the guide there? 

Michael Lafair -- Chief Financial Officer

Koji, it's Michael. Really great question. As you know, since we went public, we've actually guided down every single quarter sequentially. And part of that really has to do with the fact that we're a usage-based model, and on a quarter-to-quarter basis, there can be variability in the numbers.

We're also very prudent in our approach to guidance, as we've discussed many, many times. And we have raised our full year guidance for the year. We have really good visibility into the full year. We feel really confident about that number.

And that's kind of where we are with our guidance.

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

Got it. Got it. Super helpful there. I just wanted to be sure.

Second question, maybe for Kiwi. OK. So congrats on the acquisition of Congruity 360. It adds that legal hold technology, also that legal request compliance technology.

And we're talking to a couple of people within the legal industry, and they mentioned that adding this capability really would help drive enterprise adoption of DISCO. And I wanted to ask you, why is that? What is it particularly about this legal hold that it's so important within the enterprises?

Kiwi Camara -- Co-Founder and Chief Executive Officer

So I think it's two things, Koji. First, it's the part of the platform, that in-house council, so the lawyers who work in the corporate legal department are most likely to engage with directly. And second, it's the earliest stage of the process. So let me talk about that a little bit.

If you think about a big piece of litigation, it might start out being handled by the corporate legal department, where they do the initial assessment of the case, they interview business-side people, they collect data, they implement legal holds. But as the case matures, if it doesn't settle, they will typically engage outside counsel, a law firm, to go handle the actual litigation of the case. And so it often winds up that even though a corporation is our client and is using the product initially to collect and conduct early case assessment of data, downstream in time, the principal users are at a law firm that is representing the company in that piece of litigation. So the advantage of having the hold and request products is that we have the products, which are corporate customer, the person who is ultimately paying our bills, is actually using directly in the course of one of these legal matters.

The second point is when they use it. So because DISCO Request is the product used first and then DISCO Hold is the product used second, by the time the case is underway, the client is, in some sense, deeply invested in using our platform. And the natural next step is to proceed to use products like DISCO Ediscovery, then DISCO Review, then DISCO Case Builder. And so I think that's why you're hearing customers say there's a lot of value to a single integrated solution.

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

Got it. Got it. Thanks so much for taking my questions, Kiwi and Michael. Thank you so much. 

Operator

We will take our next question from Tyler Radke with Citi. Your line is open.

Tyler Radke -- Citi -- Analyst

Hey. Thank you for taking my questions. So there's been a lot of discussion in the investor world about usage-based models and some concerns that as we get into more of a tougher economic backdrop that customers can pull back spending a little bit faster on usage-based models. I'm curious of your perspective on this.

And to what extent would you kind of characterize the health of the spending environment in Q1 and as things have progressed here into Q2.

Kiwi Camara -- Co-Founder and Chief Executive Officer

Sure. So first of all, Q1 was a terrific quarter as you can see in the numbers, a big beat and 63% year-on-year growth. In terms of the broader question, I think the COVID quarter was really a great test of how resilient our usage-based business model would be to customer stress. And you'll recall that in the COVID year, we had one sequentially flat quarter in Q2 of that year and then we accelerated in Q3 and Q4, ultimately delivering more than 40% year-on-year growth for the full year.

I think that's a good indicator of what a really bad economic situation might do to our business. The last observation I'll make is that often in law firms, people think about the corporate or transactional partners, lawyers who do M&A or securities or project finance, as carrying the law firm in times when the economy is moving. And then in times when the economy is doing less well, it's the litigation or dispute side of the house that tends to carry the overall fortunes of the law firm. And so there's a sense in which litigation and disputes has historically been regarded as countercyclical.

If you think about all the litigation that was created in the wake of the 2008 crisis or the dot-com crisis, those are some good examples. I don't know that I would go so far as to say that DISCO's business is countercyclical. But what I would say is that the demand for legal services and people's exposure to legal requirements continues independent of the position in the economic cycle.

Tyler Radke -- Citi -- Analyst

That's helpful perspective. A follow-up for Michael. Obviously, there's been a lot of pressure out there on the company's profitability. And I'm curious, now that you've been public for some time, several quarters and as you look at your spending plan for the year, just kind of how you've adjusted your plan, if at all, if you've thought about areas of incremental efficiencies and just kind of some of the puts and takes in the operating margin outlook. 

Michael Lafair -- Chief Financial Officer

Thanks, Tyler. Really good question. So as we issued in the release earlier today, we've reaffirmed our guidance for the full year adjusted EBITDA and we raised our revenue. We are -- the macro environment is obviously interesting to watch.

But from a business perspective, we're going after the $767 billion market. We saw a small piece of that overall market. And so we really do not want to change our spending profile because we believe as we continue to spend, those investments are going to pay back in multiples. So that's kind of where we are sitting.

Tyler Radke -- Citi -- Analyst

Thank you.

Operator

And we will take our next question from Brent Thill with Jefferies. Your line is open.

Brent Thill -- Jefferies -- Analyst

Thanks. Michael, just following up on the expense question. With the escalating loss, where are all the investments going? You've mentioned the doubling of the sales team. Are you continuing on that trajectory to double again this year? Can you just give us a sense of where the big investments are going?

Michael Lafair -- Chief Financial Officer

Yes. I mean we're continuing to scale out go-to-market. And Kiwi and I talked about that since the IPO in terms of really doubling down on our go-to-market team and continuing to get efficiency from those investments. We're going to monitor those investments as we continue to make them and also continuing to invest in the product to scale out our solution to continue our market lead in the product and the solution that we have.

Brent Thill -- Jefferies -- Analyst

And, Kiwi, when you think about beyond Ediscovery and the other family of apps that you have, can you just talk to the importance now in the model, and over time, what you're seeing in that multiproduct adoption?

Kiwi Camara -- Co-Founder and Chief Executive Officer

Yes. I think we talked a lot about this in our full year earnings call, where we laid out a sort of five -pillar strategy toward becoming the company that builds technology that powers legal work everywhere that legal work is done. And I think being multiproduct is a very core part of that strategy. So if you look at what we've done historically, we started with eDiscovery, going really deep on one of the most expensive and problematic parts of the legal process, review of millions, tens of millions or even hundreds of millions of documents that are involved in legal disputes, investigations or other kinds of legal matters.

Then from there, we expanded both later in time in the process with products like DISCO Review and Disco Case Builder and then earlier in time with products like DISCO early case assessment, DISCO Hold and DISCO Request. And hopefully, the strategy there is becoming clear. Our idea is to give corporate customers more and more places where they can begin to engage with our platform and start using the platform, and then to encourage them to adopt a multiproduct solution regardless of where they start. So a customer can start with Hold and then it can be very natural for them to expand to Ediscovery and Review and Case Builder downstream.

Or a customer come to us initially with an interest in DISCO Review and then find that it's better to use the platform to manage testimony as well as documents, expand the Case Builder, and then find actually, they should manage their whole litigation portfolio in the platform and implement a solution like Hold Request at an enterprisewide solution. That's the idea. Create more entry points by building products that cater to different kinds of legal needs. And then once the customers on the platform, they have that magic DISCO experience and that is something that you can use to cross-sell them into other DISCO products over time. 

Brent Thill -- Jefferies -- Analyst

Can you quantify the percentage of revenue beyond Ediscovery? Or is that something you're not breaking out?

Kiwi Camara -- Co-Founder and Chief Executive Officer

We don't disaggregate revenue by product line. You can get some sense just by estimating when we introduced the various product. Ediscovery is obviously the most mature of our products. It was our original product.

Our second product, DISCO Review, was introduced next, then DISCO Case Builder. So at least in a sense of ranking, you can get information there. I'll tell you the reason we don't disaggregate is because we believe that over time we're going to continue to introduce more and more products. And we think of those products just as different ways of using the same underlying platform.

So we don't really care whether a customer starts out by using Hold or Case Builder or Request or Ediscovery or Review. What we want to do is get them using our platform somehow, whatever is easiest for them, and then drive adoption of the platform across more and more categories of their legal work over time, which should enable us to capture a growing percentage of their overall legal budget over time. 

Brent Thill -- Jefferies -- Analyst

All right. Thank you.

Operator

We'll take our next question from Scott Berg with Needham. Your line is open.

Scott Berg -- Needham and Company -- Analyst

Congrats on a good quarter. Thanks for taking my questions. I've got two here. First of all, Kiwi, just wanted to start off with some of the work we've done in the space recently.

One of the comments that came up with the law firm was the complexities today are so much more difficult than what they were 10 or 15 years ago in the Ediscovery process because there's still more data formats today, whether it's Slack or Teams or data, that might be in a video call or ancillary applications, trying to digest them is difficult. Is that a driver right now that you're seeing for customers trying to adopt the DISCO platform in particular? Or is that maybe an ancillary component of why a customer might like you today? 

Kiwi Camara -- Co-Founder and Chief Executive Officer

Yes. So we see growing demand for the newer kinds of data. So Slack has been a huge exposure in demand, supporting Office 365, supporting Zoom recordings. And then different industries have their own specialized things.

So for example, construction, has a lot of CAD/CAM. Some of the newer software companies that probably many of you cover have introduced their own formats that then need to be supported in downstream Ediscovery applications. So that is a driver. I wouldn't say though that it's the No.

1 driver. The No. 1 driver is not so much the explosion in the variety of data, it's the explosion in the sheer volume, right? so it's not so much that Slack is a difficult file type to handle. It's that when you collect Slack, you might collect 10 Slack messages for every one email that you used to collect when people were principally using email.

And so you see this continuation of a trend, where when I started practicing law 20 years ago, maybe a big case with 1 million documents and then a big case became 10 million documents. And now a big case is 100 million documents. And what that drives is a demand for systems that are highly performant under that kind of extreme load. And that today remains, I think, the No.

1 reason why customers switched to DISCO is amazing performance regardless of the scale of the database. The second thing it drives is a need for a more efficient way to actually understand what's in those documents and to find the evidence. And that's the shift away from brute-force associates flipping through documents to AI-powered review solutions, which can actually keep up with the explosion and the scale of the data. 

Scott Berg -- Needham and Company -- Analyst

Got it. That's helpful. And then you all have spoken a lot about sales and marketing investments and doubling of the core-bearing reps headcount on a year-over-year basis. But how should we think about that growth in sales and marketing overall? How much of it is going toward these direct resources versus your ability to press on the partner accelerator a little bit to drive more indirect sales?

Kiwi Camara -- Co-Founder and Chief Executive Officer

So we remain optimistic about the partner channel over the medium term. As is no secret, I believe that the products we're building are the future of the industry. And those products, when they're adopted, they just fundamentally change what it is that the channel does. They reduce the need for services by replacing services with software.

Now that's obviously a difficult transition for partners to make. And so you see folks who are early in the adoption cycle, partners who have been with us for six, seven, eight years now. You see some larger partners who are beginning to dip their toes in the water with DISCO, and we've talked about some of those on the past couple of earnings calls. And I think over time, you'll get to a tipping point where more of these folks build large businesses on top of DISCO.

But we're not there yet. The bulk of our go-to-market effort today is direct. And we don't believe that we're dependent on converting the channel, right? We'd like to bring the channel along. But for those who don't come along, we're perfectly happy to compete with them in the market, and we do that every day.

So in terms of where investment is going, it mirrors kind of our current sources of revenue, which is to say that the bulk of the investment is going into our direct sales force and some investment is going into building up this channel program. Again, we're very optimistic about the growth of the channel over the medium term.

Scott Berg -- Needham and Company -- Analyst

Thank you. Thanks for taking my questions.

Operator

And we will take our next question from David Hynes with Canaccord. Your line is open.

Luke Morison -- Canaccord Genuity -- Analyst

This is Luke on for DJ. Kiwi, you called out the March quarter, in particular, being a record month for Ediscovery growth. Could you just expand on what you saw there? Maybe what that implies for the shape of Q1? And then to what degree you've seen that momentum hold into April and May so far?

Kiwi Camara -- Co-Founder and Chief Executive Officer

Well, what we saw is sort of exactly what we said. We saw a tremendous spike in usage, specifically of our Ediscovery product and specifically in March. We're very excited about the growth of our business, both Ediscovery and really all the other products. And we look forward to sharing with you some updates on what unfolded in Q2 on the Q2 earnings call.

Luke Morison -- Canaccord Genuity -- Analyst

OK. Thank you.

Operator

And we will take our next question from Derrick Wood with Cowen. Your line is open.

Derrick Wood -- Cowen and Company -- Analyst

Congrats on a strong quarter. Michael, I'll start with you back on kind of the guidance question. I noticed it looks like you beat the midpoint of your Q1 guidance by 4 million, but kind of only raising the full year outlook by roughly 2 million. So just was there any pull-forward dynamic? Or have you gotten a little more conservative in your assumptions because of the macro? Or any other factors that we should be thinking about that you didn't have that full Q1 beat fully flow through the year? And I also noticed the Q2 guide being a little bit wider range on revenue than you historically have.

Any reason behind that? 

Michael Lafair -- Chief Financial Officer

So not really, Derrick. Thank you for the question. So the beat in Q1, we were really pleased with the 63% year-over-year growth, and I believe it was a 12% ease against our guidance. In terms of the full year, we raised the full year, and we've only been out -- I think this is literally our fourth quarterly conference call.

And we want to be prudent in our guidance, and we raised the full year.

Derrick Wood -- Cowen and Company -- Analyst

And just to be clear, there's nothing you're seeing from a macro demand perspective that has you changing any of your assumptions. Obviously, it sounds like you're raising the full year. So I would assume not.

Michael Lafair -- Chief Financial Officer

That is correct.

Derrick Wood -- Cowen and Company -- Analyst

OK. And then the 10-K showed that 81% of revenue from 100,000 plus customers last year. That was a nice uptick from 74% in the previous two years. Does that reflect more concerted focus upmarket and perhaps going to be less focused at the lower end of the market? Or does that just kind of reflect the maturity of your base? And having a lot more graduates to the 100,000 level.

And just any thoughts on how you see that number trending forward would be helpful.

Kiwi Camara -- Co-Founder and Chief Executive Officer

It's more the latter. It reflects the maturation of the base rather than any fundamental change in the segments that we're targeting. But it is both. So if you look at the DISCO story over time, we started out by selling to litigation boutiques and the clients of those boutiques.

And that was our original segment because they tended to have the least entrenched relationship with one of our competitors. And then over time, we began selling upmarket to the Am Law 200, and then directly to corporate legal departments. And in general, when you have a corporate legal direct sale, you're getting a larger chunk of their wallet upfront and it grows more quickly. And so those accounts tend to be larger, just again, because you're dealing with them directly rather than accessing them through the law firm channel.

So there is a little bit of that going on. But our focus on selling to corporate legal departments has been underway for several years now. So that's not a change that you're seeing in the more recent numbers. What you're seeing in the numbers is really, again, this trend we've talked about a couple of times, where customers are starting out spending more and they're growing their spend more quickly.

So whereas in the past, it might have taken three, four, or five years to get a customer to middle six figures, low seven figures, now you have some customers, and we talked about some examples in our prepared remarks, doing that ramp more quickly. Some of them inside of the year, some of them over the course of one year to two years, but certainly more quickly than the historical average. 

Derrick Wood -- Cowen and Company -- Analyst

Yes. Great [Inaudible]. Appreciate it. 

Operator

[Operator instructions]. And we will take our next question from Parker Lane with Stifel. Your line is open.

Parker Lane -- Stifel Financial Corp. -- Analyst

Hi. Thanks for taking the question. Congrats on the quarter. Kiwi, I think you pointed to strong sales efficiency in the SCR channel this quarter, perhaps the best [Inaudible] per add basis you've had in any other quarter.

What are some of the factors that you would attribute to that sales efficiency gain? And do you expect that to continue here throughout the year?

Kiwi Camara -- Co-Founder and Chief Executive Officer

Yes. So this has been an area of focus for us over the past -- well, for a long time, but really over the past year. And it's a complex of changes. First, on the management side, we've brought on board and now successfully ramped some really great director and manager-level folks, who are driving increased performance on that team.

Second, I think we have really perfected our hiring profile in terms of the kinds of people who do well in the seat. Third, we've made big investments in LND. So we have this program called DISCO University that we've talked about a little bit on prior calls. And DISCO University now has very robust onboarding training for people in each of these core sales roles, including SDRs.

And then there's follow-on experiential learning, coaching that's provided as they get onboarded, certifications to get them product awareness and so on. And also, at the other end, so as SDRs mature in their careers at DISCO, we have these great bridge programs, what we call bridge programs run by DISCO University that get those SDRs ready to be super successful CSMs or AEs or other kinds of roles in our go-to-market organization. And so it's one of those things where there's no silver bullet. It's about a continued focus on getting a little bit better every month, every quarter, and then those gains start to compound. 

Parker Lane -- Stifel Financial Corp. -- Analyst

Got it. And when we look at the international teams today, would you say that there's room for improvement on productivity, just given how new that organization is? Or is that holding up fairly well compared to the U.S. counterparts?

Kiwi Camara -- Co-Founder and Chief Executive Officer

Well, I think I have room for improvement in productivity, and we all try to get a little bit better every day. One of our core values is actually craft. And it's that idea that regardless of what you do, whether you're a salesperson or an engineer or an accountant, we can always get better and we've built systems at this scale. I think this is really a key part of our success rate. We've built a really robust BI organization that measures the heck  out of everything.

And lets us see what's working and what's not working and where we can make progress and -- or not. And because of that robust analytics structure, we're able to allow teams to experiment a lot, right, and then call the thing things that work and propagate them across the rest of the organization. This is probably a more long-winded answer than you wanted. But I think one of the amazing things we're observing in the U.K.

is that they build -- it's like a mini start-up, right? And so they've been able to innovate in the approaches that their SDRs, that their CS people and that their salespeople take in working with clients in that market. Some of those innovations have been taken back to the United States as improvements and some of them didn't pan out. And so I think in the U.K. it's a very interesting example of an organization that has both been very successful and that has allowed us to innovate in a way that can drive increased performance in the U.S.

as well. Of course, at a macro level, the U.K. is very early in its growth, and we're investing behind it because of the amazing results it's delivered. But there's a very long runway ahead.

Parker Lane -- Stifel Financial Corp. -- Analyst

Understood. Appreciate the color. Congrats again. 

Operator

We will take our next question from Mark Schappel with Loop Capital. Your line is open.

Unknown speaker -- Loop Capital Markets -- Analyst

This is Ken Greeves filling in for Mark Schappel. I'd like to ask, the company has an aggressive hiring plan this year, and the market has found particularly good IT talent continues to be tight. So to date, where are you in respect to your hiring plan? Are you on plan or ahead or behind? 

Kiwi Camara -- Co-Founder and Chief Executive Officer

As of now, we are on plan. So it took us a little while to get there. You remember in the past two earnings call, I described as sort of getting there, but not quite there. And now we're there.

In terms of how we recruit great people to DISCO, I think it's a combination of offering people the opportunity to work on a mission that matters. In our case, using technology to strengthen the rule of law. And then having built a culture that empowers people to really do things that, at other places, might be regarded as impossible and that greatly accelerate their careers. And we're proud, not only our recruitment, right, the recruitment side of the engine, but also at the fact that we have never really suffered from a spike in attrition due to the so-called great resignation. 

Unknown speaker -- Loop Capital Markets -- Analyst

That is really helpful. Thank you.

Operator

There are no further questions at this time. I will now turn the call back to co-founder and CEO, Mr. Kiwi Camara, for closing remarks.

Kiwi Camara -- Co-Founder and Chief Executive Officer

Thank you for joining us today. At DISCO, our ultimate vision is to strengthen the rule of law through the use of technology, and we're just getting started. We thank you for your interest in DISCO and for joining our Q1 2022 earnings call.

Operator

[Operator signoff]

Duration: 53 minutes

Call participants:

Lee Robinson -- Investor Relations

Kiwi Camara -- Co-Founder and Chief Executive Officer

Michael Lafair -- Chief Financial Officer

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

Tyler Radke -- Citi -- Analyst

Brent Thill -- Jefferies -- Analyst

Scott Berg -- Needham and Company -- Analyst

Luke Morison -- Canaccord Genuity -- Analyst

Derrick Wood -- Cowen and Company -- Analyst

Parker Lane -- Stifel Financial Corp. -- Analyst

Unknown speaker -- Loop Capital Markets -- Analyst

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